re: SMAN .. Earnings announcement for 1Q/2003 - EPS $0.25
Standard Management Reports First Quarter 2003 Earnings
Monday May 12, 6:38 pm ET
Net Income $.25 Per Diluted Share
INDIANAPOLIS, May 12 -- Standard Management Corporation (the "Company", "Standard Management", or "SMAN") (Nasdaq: SMAN - News; www.SMAN.com ) reported net income of $2.0 million or $.25 per diluted share.
Comments
Ronald D. Hunter, Standard Management Chairman, stated, "As challenging as the financial markets have been, we are encouraged with the results that Deutsche Asset Management has achieved by actively managing our investment portfolio. During the quarter we have reduced our airline exposure, lowered our below investment grade holdings to under 2% of the portfolio, and increased our overall portfolio rating to Aa2."
Hunter also stated, "The Health Services segment is on target with the development of its national distribution platform to serve patients across the health care continuum. The product and service suite includes direct-to- consumer, institutional and wholesale / repackaging. Distribution channel partners are in place and positioned to generate revenues for the second half of 2003."
Murray I. Firestone, Ph.D., CEO of U.S. Health Services commented, "The positioning of Standard Management and U.S. Health Services is unique within the healthcare industry. We are poised to serve the fastest growing industry segments, representing the highest consumption of healthcare goods and services."
Net Income
For the quarter ended March 31, 2003, net income was $2.0 million, or $.25 per diluted share, compared to $.8 million, or $.10 per diluted share for the first quarter of 2002.
Net income for the current quarter compared to the same prior year period was reduced by $.07 per diluted share for operating expenses corresponding to the development of our new Health Services segment. In the Financial Services segment, current period net income as compared to the same prior year period was affected by $.07 per diluted share associated with reduced spread income reflecting the lower interest rate environment, $.03 per diluted share of unfavorable mortality, and $.02 per diluted share representing increased litigation costs. The prior year period included $.03 per diluted share from a lower effective tax rate resulting from the use of tax loss carryforwards, which is reported in the Other Services segment.
Net income for the current quarter included net realized investment gains after tax of $2.7 million or $.34 per diluted share. The net realized investment gains offset tax basis capital loss carryforwards, resulting in no current income tax liability.
The prior year net income also included a charge of $1.2 million or $.15 per diluted share resulting from the write-off of goodwill from the adoption of FAS No. 142 "Goodwill and Other Intangible Assets" pronouncement.
Assets
Total assets increased 5% to $1.80 billion at March 31, 2003, up from $1.72 billion at year-end 2002.
During the quarter ended March 31, 2003, the bond sale program that resulted in net realized investment gains after tax of $2.7 million, also allowed the Company to increase the quality of its bond portfolio through reduced exposure to the airline industry and high yield bonds. At March 31, 2003 the average portfolio quality had increased to Aa2 Moody's rating from Aa3 at year-end 2002, and the ratio of high yield bonds to total bonds was reduced from 3.5% at December 31, 2002 to 1.9% at the current quarter end.
Shareholders' Equity/Book Value
Shareholders' equity excluding unrealized investment gains and losses was $82.0 million at March 31, 2003 compared to $76.0 million at December 31, 2002. Diluted book value per share excluding unrealized investment gains and losses was $10.16 per share at March 31, 2003 compared to $9.62 per share at December 31, 2002.
Shareholders' equity as reported in the consolidated balance sheet was $92.4 million at March 31, 2003 compared to $87.7 million at December 31, 2002. Diluted book value per share was reported as $11.44 at March 31, 2003 compared to $11.10 at December 31, 2002.
Standard Management is a financial holding company headquartered in Indianapolis, IN. Information about the company can be obtained by calling the Investor Relations Department at 317-574-6230 or via the Internet at sman.com .
The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 37A of the Securities Exchange Act of 1934, including statements regarding the company's hopes, beliefs, intentions, or strategies regarding the future. Forward-looking statements include, but are not limited to, expectation of growth rates, new business, and acquisitions.
STANDARD MANAGEMENT CORPORATION (NASDAQ: SMAN - News)
(Unaudited, dollars in thousands, except per share amounts)
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Three Months Ended
March 31
2003 2002
RESULTS OF OPERATIONS
Revenues $32,434 $20,463
Net income $2,010 $792
Operating income (loss) (a):
Financial Services $1,533 $2,644
Health Services (555) (3)
Other Services (1,655) (969)
Discontinued Operations - 513
Total operating income (loss) (677) 2,185
Net realized investment gains (losses) 2,687 (181)
Cumulative effect of accounting change
for goodwill impairment - (1,212)
Net income $2,010 $792
PER SHARE DATA (Diluted)
Net income $0.25 $0.10
Operating income (loss) (a):
Financial Services $0.19 $0.34
Health Services (0.07) -
Other Services (0.21) (0.13)
Discontinued Operations - 0.07
Total operating income (loss) (0.09) 0.28
Net realized investment gains (losses) 0.34 (0.03)
Cumulative effect of accounting change
for goodwill impairment - (0.15)
Net income $0.25 $0.10
Weighted average shares outstanding 7,870,298 7,607,930
Weighted average shares
outstanding (Diluted) 7,900,038 7,868,116
March 31 December 31
SHAREHOLDERS' EQUITY 2003 2002
(Audited)
Shareholders' equity:
Excluding unrealized gain on securities 82,006 75,995
As reported 92,371 87,734
Book value per share (Diluted) (b):
Excluding unrealized gain on securities $10.16 $9.62
As reported 11.44 11.10
(a) Operating income (loss) for 2003 is a non-GAAP financial measure that
differs from net income by net realized investment gains and losses
net of taxes, net of amortization of deferred acquisition costs
related to those gains and losses net of tax. Operating income
(loss) for 2002 differ from net income by net realized investment
gains and losses net of taxes, amortization of deferred acquisition
costs related to those gains and losses net of tax, if applicable,
operating income from discontinued operations, and cumulative effect
of accounting change for goodwill impairment.
The Company determines operating income (loss) as explained above and
includes items that the Company believes are not indicative of
overall operating trends. While these items may be significant
components in understanding and assessing the Company's consolidated
financial performance, the Company believes that this presentation of
operating income (loss) enhances the understanding of its results of
operations by highlighting earnings attributable to the normal,
recurring operations of its business. However, operating income
(loss) is not a substitute for net income determined in accordance
with GAAP.
(b) Considers conversion of options and warrants using the treasury
stock method and stock price as of respective balance sheet date.
STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
ASSETS March 31 December 31
2003 2002
(Unaudited) (Audited)
Investments:
Securities available for sale:
Fixed maturity securities at fair
value (amortized cost $1,462,069
in 2003 and $1,350,961 in 2002) $1,487,858 $1,379,792
Mortgage loans on real estate 6,070 6,348
Policy loans 12,540 12,722
Real estate 1,275 1,252
Equity-indexed call options 3,541 3,904
Short-term investments 616 713
Other invested assets 926 1,076
Total investments 1,512,826 1,405,807
Cash and cash equivalents 33,582 60,197
Accrued investment income 14,125 16,255
Amounts due and recoverable from reinsurers 38,563 38,951
Deferred policy acquisition costs 158,340 153,954
Present value of future profits 14,870 14,949
Goodwill 10,320 6,417
Property and equipment (less accumulated
depreciation of $4,098 in 2003 and
$3,903 in 2002) 12,941 12,832
Other assets 6,708 5,785
Total assets $1,802,275 $1,715,147
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Insurance policy liabilities $1,653,975 $1,570,348
Accrued expenses and other payables 5,093 5,561
Obligations of capital lease 706 804
Mortgage payable 6,908 6,757
Notes payable 13,300 13,000
Current income taxes 2,064 3,811
Deferred federal income taxes 7,158 6,432
Total liabilities 1,689,204 1,606,713
Company-obligated trust preferred securities 20,700 20,700
Shareholders' Equity:
Preferred stock, no par value:
Authorized 870,000 shares; none issued
and outstanding -- --
Common stock and additional paid in
capital, no par value:
Authorized 20,000,000 shares; issued
9,572,167 in 2003 and 9,369,752
in 2002 67,858 63,857
Treasury stock, at cost, 1,515,078 shares
in 2003 and 2002 (7,671) (7,671)
Accumulated other comprehensive income 10,365 11,739
Retained earnings 21,819 19,809
Total shareholders' equity 92,371 87,734
Total liabilities and shareholders'
equity $1,802,275 $1,715,147
STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, Dollars in Thousands)
Three Months Ended
March 31
2003 2002
Revenues:
Premium income $1,877 $2,383
Net investment income 21,146 17,153
Call option losses (3,098) (1,393)
Net realized investment gains (losses) 9,927 (274)
Policy income 2,233 1,777
Fees and other income 349 817
Total revenues from continuing
operations 32,434 20,463
Benefits and expenses:
Benefits and claims 2,354 2,292
Interest credited to interest-sensitive
annuities and other financial
products 11,651 7,894
Amortization 9,879 3,988
Commission expenses 68 577
Other operating expenses 4,410 2,724
Interest expense and financing costs 1,025 1,112
Total benefits and expenses from
continuing operations 29,387 18,587
Income before federal income taxes 3,047 1,876
Federal income tax expense 1,037 385
Income from continuing operations 2,010 1,491
Income from discontinued operations
less taxes of $0 and $264, respectively -- 513
Cumulative effect of accounting change
for goodwill impairment -- (1,212)
Net income $2,010 $792 |
